Unlike looking for a property to live in, you need to remove emotion and consider the investment potential of the property. Below are some key considerations you should think about:-

1. Rental Income – most lenders require the rent to exceed the monthly mortgage payments, on an interest-only basis, by 145% per month at an assumed rate of around 5.5%, though this does depend on your personal tax rate, the type of property and whether you are buying in a personal name or through a limited company. For example, this can be as low as 125% at the pay rate on a 5-year fixed product.
2. Objectives – is the property to bolster your income, or for longer-term growth, or both? There will be tax aspects you need to consider so please make sure you get independent tax advice from a specialist. Getting rental income may be a nice bonus, but it could push up your total income tax rate and mean you are no longer eligible for certain benefits.
3. Talk to your Estate Agents for advice on property type and location.
4. Talk to a professional broker about your options. Trust us on this, even if it’s not us (which would be upsetting) make sure you do not attempt to do this alone. We will help guide you through the myriad of regulations and criteria to make sure you get the right buy to let mortgage for you.

First Time Landlord Mortgage Requirements

So you’ve decided that becoming a landlord is right up your street, but what are the requirements for lenders to give you a buy to let mortgage?

As with a residential mortgage, there are the usual criteria you need to meet to be eligible for a mortgage, but as a landlord there are some extra considerations:

• Your deposit – this will usually be higher than a regular residential mortgage. Be prepared for a 15-25% deposit on the property.
• Age – the minimum age is 18 however some lenders will refuse borrowers under 21 or 25. On the other end of the scale, some lenders won’t lend to people aged 75 or over. Your Coreco advisor will find the right lender for you.
• Property use – lenders will prefer someone who is planning to offer single assured short-term tenancies. HMOs and holiday/short term lets may require a more specialist lender which your Coreco advisor can help with.
• Income and affordability criteria – As a landlord, you will need to show lenders that your rental income from your property will cover the mortgage payments by 125-145%.
• Along with the above requirements, you’ll also need to get your paperwork ready for your mortgage application.

Your Coreco advisor will let you know exactly what your chosen lender requires but generally you’ll need:

• Latest bank statements
• Proof of ID
• Proof of income eg payslips or SA302s
• Any outstanding debts
• While not necessary, if you can show that you have experience as a landlord this can help applications.

Extra Costs To Consider

While lenders will make sure you can afford to pay back your mortgage each month, there are also other costs to consider as a landlord. It’s well worth doing some further research into these costs as these can vary on the house you’re letting out and the area it’s in. We’ve put together some of the more forgotten costs of being a landlord below:

• Energy Performance Certificate – An EPC shows tenants how energy efficient the property is. While this is generally a small cost it is something that will need to be completed before any viewings are taken making it an upfront investment in the property.
• Electrical Safety Inspection Report – Since July 2020 landlords are obligated to get an electrical safety report to make sure that all national standards for electrical safety are met. This must be renewed every 5 years.
• Gas Safety Certificate – A gas safety check is another legal requirement and must be completed annually. This involves a gas safe registered engineer checking all gas appliances and fittings.
• Smoke/Carbon Monoxide Alarms – All landlords are required to fit smoke and carbon monoxide alarms. Luckily this is a sensible and inexpensive requirement!
• Letting agent fees – If you decide that you want to use a letting agent it’s well worth researching the costs involved, especially if your investment property isn’t local to you. Depending on the level of management you require this can quickly become one of your larger costs.
• Landlord License – Certain boroughs require landlords to register and obtain a landlord license before you can let out your property. This requirement and cost varies per borough.
• Landlord insurance – Much like normal building insurance you will need to make sure you have an appropriate level of cover. At a minimum, you’ll need building insurance to get your mortgage but landlord insurance can also cover emergency call outs as well as legal expenses.
• Maintenance, Repairs & Redecorating – The biggest and least predictable costs are any maintenance and repair jobs.

These are just a few of the hidden and unexpected costs of being a landlord but we’d recommend doing further research into the costs once you have an idea of which property you want to invest in.

Professional landlords applying for a buy to let mortgage will now need to provide more information which can include the following:

1. Details of personal or alternative sources of income and associated Tax Returns, including evidence that the appropriate tax is paid on the rental income
2. Detailed Portfolio summary to include more than the standard Property Value, Rent Received, Mortgage Amount and property address provided previously. It should also include columns on costs associated with the property, for example, service charges, ground rent, lettings agent’s costs, insurances etc. In some instances, this portfolio will be stress tested to check the rent covers the mortgage payments.
3. Asset/Liability Statement
4. Cash Flow Projection
5. Business Plan and commentary

Our experts at Coreco know which buy to let lenders require what and can help ease the burden to direct you to the most appropriate lender.

Limited Company Borrowing.

Given the recent tax changes many of our landlords now want to borrow in a Limited Company rather than personal names. We strongly recommend, in fact we insist, that our clients obtain independent tax advice to ensure they are borrowing in a manner that is right for them.

If a Limited Company is the preferred route, then no worries. Our experts know exactly which lenders can help and offer you the very best interest rates to fit your circumstances.

Residential Development and Commercial Finance

For landlords with portfolios of a certain size, the line often blurs between residential investment and commercial financing, whether it is developing a site, converting a property into flats, or even building from scratch. Getting the right finance and advice in this area of the market is just as critical and can often mean the difference between turning a healthy profit or not. Our team at Coreco Commercial have years of experience in property development finance and buy to let portfolio mortgages.

Previously, a licence was only required for properties with three or more storeys that are occupied by five (or more) people from at least two households. Now this has been extended to all properties that are occupied by five or more people from two or more households – regardless of the size of the property.

However, even with all of this, professional landlords are sensing an opportunity and if you structure and gear your portfolio correctly with the right tax advice, savvy landlords can still do good business.

It is more important than ever to look for a buy to let broker who understands the current market and the numerous foibles of each individual lender. Luckily for you, we do! Managing a portfolio is a serious blend of science and art these days, but for those with the patience and an expert like us alongside them, landlords can still look forward to a rosy future.